Notes on New Jersey's Government that don't fit the topics of my other blogs

Thursday, October 13, 2016

A Hunterdon County lawyer's $67.10 overdrawn trust account led to multiple ethics charges being brought against him.

When a New Jersey lawyer overdraws his or her trust account, Court Rule 1:21-6(b) requires the bank to notify the Office of Attorney Ethics (OAE). When TD Bank notified the OAE that a Clinton lawyer's trust account was overdrawn by $67.10, the OAE's investigation discovered a lot more than just a minor bookkeeping error.

The January 7, 2015, $67.10 overdraft of Paul F. Clausen's trust account was caused by his withdraw of $250 for fees that he had earned on a case. But an attorney's fees are supposed to deposited and withdrawn from the lawyer's business account. A trust account is for money that the lawyer is holding in trust for others. According to the September 27, 2016 ethics complaint, (Office of Attorney Ethics v. Paul F. Clausen, Docket Nos. XIV-2015-0016E and XIV-2015-0374E), the OAE's investigation revealed 77 instances where Clausen withdrew his fees directly from the trust account, sometimes by way of cash withdraws, rather than issuing a check payable to his business account.

Ethics officials claim that Clausen was less than truthful when he appeared at the OAE's office on April 23, 2015 for a demand audit. According to the complaint, Clausen told ethics officials that he had never filed bankruptcy even though court records show that Clausen's Chapter 13 bankruptcy petition had been dismissed only on August 17, 2015--only days before. The complaint also alleges that Clausen lied about withdrawing cash from his trust account--an act that is specifically prohibited by the court rules--when the bank statements showed multiple $100 cash withdraws having been made from Clausen's trust account.

Ethics officials claim that while Clausen had a business account, it was frequently overdrawn and that Clausen used his trust account for his business transactions because wanted to avoid having the bank take overdraft fees out of any money he deposited into the business account. The OAE alleges that Clausen also kept his business account's balance at zero to frustrate his judgment creditors' attempts to levy against his bank accounts. According to the complaint, three creditors, including a woman named Grace Casement who took a $29,254 default judgment in her malpractice suit against Clausen, attempted to levy on the business account only to find that there was no money in it.

According to the ethics complaint, Clausen's landlord, Meridian Property Group, which also had a judgment against him for unpaid office rent, also unsuccessfully levied against the empty business account. Meridian, however, was able to execute against Clausen's 2004 Lexus ES330 and have it sold at public auction. According to the ethics complaint, within a month after his Lexus' seizure, Clausen deposited a $4,500 retainer in his trust account and made a $4,100 cash withdraw from the trust account to make a deposit on another car.

In sum, the OAE alleged that Clausen's "deposit of his earned and unearned legal fees in his trust account and subsequent cash withdrawals therefrom was intended to insulate [Clausen's] personal assets and to attempt to place them beyond the reach of his creditors."

The complaint also accuses Clausen of misleading ethics officials into believing that he had made multiple payments to Casement, the malpractice plaintiff, when he actually had made only one $1,000 payment. The Supreme Court reprimanded Clausen on January 12, 2016 for gross negligence because he failed to file Casement's personal injury lawsuit before the statute of limitations had run.

At the time of this writing, Clausen had not yet filed an answer to the complaint. The ethics charges are only allegations--nothing has been proven--and Clausen is entitled to hearing.

Since 1995, attorney disciplinary hearings have been open to the public. Anyone who is interested in being notified in advance of any hearings on this matter may complete and send a hearing request form to the Office of Attorney Ethics in care of Barbara Cristofaro via fax to 609-530-5238.